Birdsall trustee files two lawsuits to recoup millions in losses

Aug. 13, 2013

Howard Birdsall (right) is shown during his initial appearance in State Superior Court in Toms River on May 20, 2013. Also shown are (L-R): James Johnston, Robert Gerard and William Birdsall. / ASBURY PARK PRESS PHOTO BY THOMAS P. COSTELLO

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TRENTON — The court-appointed trustee overseeing Birdsall Services Group’s bankruptcy filed a lawsuit on Monday against 21 of its former executives, seeking to recoup the millions of dollars in value the Eatontown engineering firm lost in its whirlwind demise from a pay-to-play corruption scandal.

The lawsuit against the 21 executives did not specify a dollar amount being sought. However, it pointed to a loss in value of $36.2 million, saying the firm, valued at $41.8 million at the end of 2011, was sold for $5.6 million in June.

Trustee Edwin H. Stier also filed another lawsuit Monday seeking to recoup $526,239 from attorneys who were paid by Birdsall to defend individual defendants that the firm indemnified on May 4, 2012 after they came under criminal investigation.

“The purpose of the lawsuits is to recover and preserve as much of the company’s assets as possible for the benefit of those financially hurt by the actions of the company’s former leadership,” Stier said in a prepared statement after the lawsuits were filed in federal bankruptcy court in Trenton. “These two lawsuits seek the recovery of assets that will help restore the losses of creditors, shareholders and former employees.”

The executives indicted in the lawsuit over the firm’s loss of value include seven who are under indictment in the pay-to-play corruption scheme, two who have already pleaded guilty to participating in the scheme, and 12 others who were not charged criminally. The lawsuit alleges the actions or inactions of the executives drove the firm into bankruptcy.

Birdsall’s quick demise followed an investigation begun in May 2012 that led to the indictment on March 26 of the firm and seven of its executives on charges that they circumvented the state’s pay-to-play laws.

Authorities allege that the firm, instead of making corporate campaign contributions that would have disqualified it from receiving public contracts, had individual employees make campaign contributions in amounts small enough to avoid reporting requirements, and then reimbursed those employees through company bonuses. The state alleges the firm derived millions of dollars in public contracts through the illegal campaign contributions.

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Stier’s lawsuit revealed new details of the scheme it said was orchestrated by Thomas K. Rospos of Belmar, former executive vice president and board member of Birdsall who is among the indicted executives.

It said that Rospos was the person who handled political contributions and was tasked with ensuring Birdsall’s compliance with laws. Rospos and Alan P. Hilla of Brielle, another former executive under indictment, would solicit campaign contribution checks from employees, telling them they were necessary to obtain business in the state of New Jersey.

Approximately 47 percent of Birdsall’s revenues came from work it performed for municipalities, counties and the state of New Jersey, the lawsuit said.

Individual engineers were told what campaign events to attend, what candidate to support and how much to write the check for, the suit said. The practice continued after New Jersey in 2004 enacted its pay-to-play law, which makes it illegal for a company to reimburse employees for campaign contributions through bonuses, the suit said.

Despite that, Rospos falsely assured the firm’s officers, directors and employees that he had obtained a legal opinion from a reputable law firm that the campaign contributions and reimbursements were in compliance with the state’s pay-to-play law and Election Law Enforcement Commission’s regulations. No officer, director or employee ever asked to see a copy of the opinion, or examined the pay-to-play law and ELEC regulations, the lawsuit said. They also failed to question the rationale for requesting personal campaign donations in the amount of $299, which do not have to be reported to ELEC, the suit said.

From 2008 through early 2012, more than 1,000 personal campaign contributions worth at least $1.05 million were made by those named in the lawsuit, who were later reimbursed for the contributions, the suit said. Of those, $549,487 went to Republicans, $445,650 went to Democrats, and $58,400 went to independents, nonpartisan candidates, unaffiliated political groups and nonprofit organizations, the suit said.

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Rospos determined the annual budget for the bonus pool from which the contributions were reimbursed, and that ranged between $500,000 and $600,000 a year, one of the firm’s top five expenses, the lawsuit said. When directors asked to have that amount reduced, Rospos refused, telling them it was for “extraordinary efforts of officers and directors of the company.”

Rospos would present the controller with handwritten notes about the amounts of bonuses, and the controller “would gross up the numbers to account for taxes and withholdings,” the suit said. “This would ensure that the individual contributors were reimbursed in full for their political contributions.”

The suit said that Rospos established a group that would meet regularly to select campaigns or political organizations they would support financially.

The firm, through its attorney, pleaded guilty to criminal, pay-to-play corruption charges on June 13 in a plea bargain that calls for a $1 million fine, in addition to $2.6 million in civil penalties.